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The 2026 Federal Budget made some significant changes to property investment in Australia. If you’re a home buyer trying to work out what it means for you, the headlines don’t quite tell the full story.
The short version is this: the Budget is designed to reduce investor competition for existing homes.
That’s genuinely useful for first home buyers and owner-occupiers. But it’s not a clean win, and it doesn’t change the thing that actually determines whether you can buy, which is your borrowing capacity.
What actually changed
The headline measure is negative gearing.
From 1 July 2027, investors who buy established residential properties will no longer be able to offset rental losses against wages or other income in the same way they can today.
They can still carry those losses forward and claim them against future property income. However, the main tax incentive that has driven a lot of leveraged investment into existing housing is being wound back by the government.
The Budget replaces the 50% capital gains tax discount with a 30% minimum tax rate on residential property gains, combined with cost base indexation.
Both changes apply to new purchases made after Budget night. Existing properties are grandfathered, so investors already holding won’t be affected.
Importantly, both negative gearing and the CGT discount still apply in full for new residential property. The intent is to redirect investment into new housing supply rather than existing homes.
There were also supporting measures, including a $2 billion Local Infrastructure Fund and an extension of the ban on foreign purchases of established dwellings to mid-2029.
What this could mean for buyers
For first home buyers, the practical impact is that investors will have weaker incentives to compete for established properties at the entry level of the market.
CBA’s Budget housing analysis expects price growth to slow to around 3% through December 2026, down from 5% forecast previously, partly reflecting these changes.
Treasury modelling suggests the reforms could support around 75,000 additional owner-occupiers over the next decade, as properties that might have gone to investors instead go to people planning to live in them.
There’s a nuance worth knowing, though. Investors who already own established properties have an incentive to hold them rather than sell, because selling means giving up their grandfathered tax treatment. That could actually reduce supply in the short term, even as new investor demand eases.
The market impact will vary by location and price point, and it’ll take time to play out.
What hasn’t changed
Your borrowing capacity hasn’t moved.
The cash rate is now 4.35% following the May 2026 decision. Lenders are stress testing applications at a much higher rate than the actual loan rate. That’s the rate you need to prove you can service, not the rate you’ll actually pay.
Policy changes can shift competition in the market, they don’t change how much you can borrow.
Reducing investor competition is only useful if your borrowing capacity actually reaches the price point you’re targeting. So, getting pre-approval sorted before you start acting on budget-driven momentum matters so much.
The question isn’t just whether there’s less competition. It’s whether you’re in a position to take advantage of it.
What to do next
If you’re thinking about buying, the most useful thing you can do right now is get a clear picture of your borrowing capacity.
That gives you a real number to work with. Not just a figure from an online calculator or a mate’s estimate based on their own experience.
This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
